Scott Walker and the Failure of Trickle Down

(AP Photo/Scott Bauer)

Governor Scott Walker speaks with reporters on February 1, 2018, in Madison, Wisconsin.

 

In January 2011, two new governors took office in the neighboring states of Minnesota and Wisconsin. Minnesota’s new governor, Democrat Mark Dayton, had campaigned largely on a platform of taxing the rich to provide the services the state needed. By contrast, Wisconsin’s new governor, Republican Scott Walker had pledged to cut taxes in order to create jobs. Over the course of the past seven years, these two governors have taken their states on vastly different trajectories: Minnesota to the left, and Wisconsin to the right.

How these two diametrically opposed approaches have played out has been chronicled before, including by the Prospect, where in 2015, as the governors embarked on their second terms, Ann Markusen wrote how “Minnesota and Wisconsin offer something close to a laboratory experiment in competing economic policies.” Now, nearing the completion of those second terms, the merits and problems of these two philosophies of governance can be tallied more definitively. And a new report from the Economic Policy Institute does just that.

The verdict? Minnesota’s economy has come out ahead.

“It’s not often that we get as good a case where we can point to differences in state policies likely driving differences in economic outcomes,” says David Cooper, the report’s author and senior economic analyst at EPI. Cooper explains that Wisconsin and Minnesota have many similarities in terms of their populations, progressive histories, and the sizes of their economies and work forces. And for some time, the economic and political courses of the two states were rather parallel—until the elections in 2010. According to Cooper, comparing the two states is useful “not only because of the similarities but because of how big of a departure they made from each other. … [It was] one of the starkest divergences in state economic policy in any two neighboring states,” he says.

Over the past seven years, hourly wages in Minnesota have increased by 2.4 percent over inflation, while wages in Wisconsin rose by just 0.3 percent after inflation. Minnesota, where job growth has been stronger than Wisconsin, also outpaced Wisconsin in reducing unemployment. And Minnesota also has enjoyed strong growth in median household income as compared with Wisconsin—which helps explain the reduction in Minnesota’s poverty rates. In Wisconsin, however, poverty has worsened.

How did Minnesota do it? In large part, thanks to Democratic control of both the statehouse and the governor’s office in 2013 and 2014, the state enacted an impressive array of progressive policies. Minnesota raised its minimum wage and expanded labor protections. Dayton also expanded Medicaid, and the federal dollars that came with that expansion helped create more health-care jobs. The administration also strengthened the social safety net, expanding paid sick and family leave and strengthening unemployment insurance. To fund these policies, as Katie Hatt, executive director of the North Star Policy Institute explains, Dayton kept his promise to raise taxes, through “really meaningful legislation that was passed in 2013 that set our tax system on very sound footing.”

That legislation raised taxes mostly on the wealthy, and “enabled significant investment in public education, and has [shown] that those who can pay more, do,” Hatt says. “[It] has not led to huge flight of high-income earners out of Minnesota.” She points out that these public investments in education, public infrastructure, and public benefit programs help attract residents. That may be why, according to the EPI report, Minnesota has seen its population increase through people moving into the state, while Wisconsin has had more residents leave than new residents arrive.

In Wisconsin, Walker, mimicking the likes of Kansas’s Sam Brownback, attempted to turn the state into a testing ground for conservative policies. So began an era of tax cuts and deregulation alongside cuts to the public sector. In 2010, Walker promised his agenda would create 250,000 jobs. Seven years later, that still hasn’t happened. Instead, public money sent to corporations meant to create jobs has sometimes been used to outsource them.

Walker’s prominent attacks on unions, which have inspired other conservative governors, have had broad effects on wages and worker protections. Past EPI research has shown that states with higher union density typically experience higher wage growth—for both union and nonunion employees—compared with other states. Walker also rejected Medicaid expansion and the funds that came with it, which limited the ability of low-income people to access health insurance, and likely cost the state hospital jobs. According to the EPI report, if Wisconsin had the same rate of coverage as Minnesota enjoys, 70,000 more Wisconsin residents would have health insurance.

“One of the reasons why we looked at all these different measures is because these are the things that really tell the story of how economic changes are actually affecting ordinary people,” says Cooper. Indeed, a conservative think tank in Minnesota recently criticized how EPI interpreted GDP data, writing that GDP is “the key metric of economic activity,” and that interpreted differently, Wisconsin’s GDP outpaced Minnesota’s. But GDP is not as good a predictor of general health and well-being as wage growth, poverty reduction, and the share of state residents who have health insurance.

In fact, says Robert Kraig, executive director of the advocacy organization Citizen Action of Wisconsin, Walker’s policies have made life worse for people in Wisconsin, and especially for low-income people. The reduction in union density, he says, has contributed to a dramatic reduction in the number of jobs that can actually support a family. The idea that a person needs two or three jobs to make ends meet is a “consistent lament that people have, especially in the rural areas,” he says.

The silver lining, Kraig says, is that that Walker’s policies have mobilized progressives in campaigns that are both big-picture and concrete. “[Citizen Action’s] big thing is not just to be against the Walker agenda, but to offer a constructive alternative,” he says. “We are developing campaigns around the fundamental premise that the economy is human-made”—in Wisconsin’s case, Walker-made. “If we want economic opportunity … then we have to plan for it—we have to actually create such an economy.”

Citizen Action’s response has been a plan to create living-wage jobs through a ten-year transition to clean energy. The group is currently working to introduce a resolution to the Milwaukee City Council to convert Milwaukee’s economy to one that shifts fully to renewable energy—and in the process provides jobs that can support a family. The smaller city of Eau Claire has recently committed to moving toward 100 percent renewable energy as well as carbon neutrality by 2050.

For now, however, Walkerism rolls on. The governor recently signed an $80 million legislation package that creates some of the harshest welfare restrictions in the country, imposing work requirements and implementing additional drug testing for populations applying for public assistance.

In Minnesota, by contast, a bipartisan bill to stabilize pensions for public workers is making its way (“pretty smoothly,” says Hatt) through the state legislature. (Hatt points out that 90 percent of public-sector retirees stay in Minnesota.) To be sure, Dayton works with the Republican-majority legislature elected in 2014, and spends a lot of time defending the progressive policies enacted earlier in his term.

The EPI report is quick to point out that Minnesota’s better economy does not mean that the state is a progressive utopia. There is stark racial inequality of both income and wealth, as well as education. In Minneapolis, a black student is eight times more likely to be suspended than a white student. (Nationally, a black student is three times more likely to be suspended than white student.) And charter schools have advanced across Minnesota communities of color, with little evidence that they’re leading to student success, but much evidence that they’re leading to increased segregation. And police brutality touches even the most progressive of places, as evidenced by the police killing of Philando Castile in St. Paul in 2016.

“We know there’s still work to do,” says Hatt. But with the “strong foundation of progressive policies … based on fair and progressive budgeting and taxation,” she says, the state is better equipped to find a path to solve those problems.

With the results from the two states, “You really have a complete debunking of the whole conservative economic program,” says Kraig, “and I think a proof that what it’s really about is enriching the one percent and large corporations. The idea that it’s going to help average people by encouraging business is clearly being debunked by the results of these policies once you actually implement them.”

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